IN THE COURT OF THE HON'BLE 4TH ADDL DISTRICT JUDGE, NELLORE

ARBITRATION O.P. NO.618 OF 2021

Between:

Ramesh Kumar Reddy Pallamreddy

S/o. Nagi Reddy Pallamreddy aged about49 years
Situated at 1-92, Main, Pottempadu village
Near Ramalyam, Nellor, A.P. - 524346. ...
Petitioner

Versus
1. JM Financial Services Limited
Situated at CNERGY, 5th Floor
AppasahebMarathe Marg Prabhadevi
Mumbai, Maharashtra -400025. …
Respondent 1

And

2. JM Financial Services Limited

Plot NO.14, D-16-2-431, 4th Floor,
Mini Bypass Road, SrinivasaAgraharam,
SPS.R. Nellore District - 524001 …
Respondent 2

And

3. P.Dinakara Rao (Arbitrator) …

Respondent 3

.....

[Respondent No.1 and 2 are the same party and whereas

Respondent No. 3 P. Dinakara Rao (Arbitrator)is a Formal
Party]

COUNTER FILED ON BEHALF OF THE RESPONDENT NO. 1

AND 2 TO THE APPEAL FILED BY THE PETITIONER UNDER
SECTION 34 OF THE ARBITRATION AND CONSIDERATION ACT,
1996 FOR SETTING ASIDE ARBITRATION AWARD DATED
20.04.2021 AS CORRECTED/MODIFIED VIDE AWARD DATED
02.07.2021 IN ARBITRATION MATTER NO.
NSEHRO/0000124/20-21/ISC/IGRP/ARB/APPL PASSED BY
THE ARBITRAL TRIBUNAL
 1. This petition is not maintainable either at law or on facts and
is liable to be dismissed in limine.

2. The respondents deny all the allegations which are made

against them in all the paras in the petition except those that are specifically
admitted by them to be true and put the petitioner/aggrieved party to strict proof
of the same.

It is true to state that the appellant is a registered Client to the Respondent

M/s. JM Financial services Ltd., (JMFL) vide Trading No.13810036 and he used to
trade online. It is not true to state that the appellant is a small investor, invested
an amount of Rs. 5,00,000/- (Rupees Five Lakhs Only) . It is not true to state that
the appellant did not know the crisis of Yes Bank Ltd., at the time of Sale as on
16-03-20 at 9.30 am. It is true to state that the course of the trading activity, the
appellant have placed an order (Cash on Delivery) to buy 18000 shares of Yes
Bank Ltd., on 13-03-2020 at 3.00 pm and the trade was executed online through
the 1st Respondent. It is not true to state that pertinent to mention that, the 1st
Respondent has been always allowing all its Clients and Respondent immediately
permitted the appellant to sell the said shares of Yes Bank Ltd at 09-07 A.M. It is
not true to state that pertinent to note that, the shares that were bought on 13-
03-2020 would come on 17th March 2020, Neither JMFL Nellore Branch, as well
as the 1st Respondent's HO have raised objection for the shares being sold on
16th March 2020. It is not true to state that out of place to mention that, the 1St
respondent is duty bound to raise the objections and/or restrictions of the sale
against the mistakes in trading by its Clients. It is not true to state that after
placing sale of 18000 shares of Yes Bank Ltd., the appellant came to know about
the restrictions on the Yes Bank shares and more particularly about Gazette
Notification dated 13-03-2020 issued by the Government of India through his
friends and Surprisingly, Immediately rushed to the 1st Respondent's office @ 10-
00 A.M on 16-03-2020 and informed the 1st Respondent's Nellore branch Head
Mr. P. Chandra Mohan about the inadvertent sale of his shares of Yes Bank and
requested him to take necessary and appropriate steps to mitigate his losses. It is
not true to state that Neither JMFL Nellore Branch, as well as the 1st
Respondent's HO has advised till date. It is not true to state that the absolutely
false that JMFL official advised to square of the sale position on 16.03.2020 and
the appellant has chosen not to do any caution. It is not true to state that this is
JMFL basic responsibility to square of the position immediately to safeguard their
clients' money, since it is restricted 25% free and 75% lock -in. It is true to state
that it is the basic duty of the 1st Respondent to inform any restrictions on any
sale/trading, but the 1st respondent informed about the restriction on the yes
bank shares through the Email to the each and every client. It is not true to state
that Non information of the same is nothing but a deficiency of service on its part
and the 1st respondent is liable for all the consequences that may arise out of
non-informing. It is submitted that, every transaction of Appellant's account is
done only via the 1st respondent .

The said Notification.

It is not true to state that the 1st respondent acted as negligent towards
its obligations and apart from this, the 1st respondent did not act
immediately, when I notified his inadvertent sale of yes bank. It is not true to
state that the 1st respondent's system was also showing that the appellant
was having 18000 shares on the day of sale i.e. 16-03-2020. It is not true to
state that flash / pop-ups/ warning / caution, should have been issued by the
1st respondent alerting that the said transaction cannot be permitted /
restricted and there is some problem in Yes Bank shares. It is not true to state
that the 1st respondent neglected and failed to perform its duty bound
obligation. It is not true to state that the 1st respondent alone is responsible
for all the consequences to the appellant's shares of 18000 of Yes Bank
Limited and the appellant is not liable and he should be compensated for his
loss. It is not true to state that the 1st respondent now JMFL saying that the
appellant selling position was auctioned as the shares were received late from
Clearing Corporation and also 75% of shares of Yes Bank was locked as per
the Government notification. It is true to state that as per the transaction
statement of CDSL sent by the 1st Respondent/JMFL, it clearly shows that the
18000 shares were transferred from unknown account to the account of
appellant after a long time. It is not true to state that the appellant was under
the bonafide impression that the shares bought on 13th March, would be
adjusted against 1st the inadvertent selling order dated 16th March 2020, had
anyone of the Respondent/JMFL. It is not true to state that the appellant
would had squared up his possession on 16" March 2020 before closure of
trading hours as the price was also lower, if the 1 st respondent had
acted/responded immediately. It is not true to state that to the dismay,
nothing was communicated/informed to the appellant. It is not true to state
that apart from that the appellant had placed the sale order of YES Bank
shares under CNC mode as

It is not true to state that the………………………

action taken by the EXCHANGE, What made the Respondent/JMFL to keep

ignorant/silent till 24th March 2020 at evening time and passed a debit entry
with an anti-date i.e. 19th date. It is true state that It is pertinent to note that, as
per the rules of stock exchanges, the auction details are bound to be informed to
the appellant. It is not true to state that no such information was communicated
to the appellant till 27-04-2020. It is not true to state that the appellant learnt
from reliable source that, there was no auction of the shares sold by the
appellant. It is not true to state that the auction story concocted by the 1 st
respondent/JMFL is false and fabricated to have unlawful gain. Even if believed it
to be true, the 1st respondent/ JMFL should have informed me on 19.03.2020
itself. It is not true to state that the 1st respondent / JMFL had acted
ignorance/quiet and passed the auction entry on 24th of March 2020 evening.

It is true to state that 1st Respondent/JMFL has allowed Ito take the pay out of
Rs.40,000/- on 20-03-2020 from out of the available amount and also purchased
again 10,000 Yes Bank Shares on 24-03-2020 apart from intraday trading between
16-03-2020 to 24-03-2020 only and exclusively from the sale proceeds of 18000
YES Bank shares dt.16.03.2020 . How is it possible? (Copy of the ledger may be
referred to), It is true submitted the appellant had kept surplus cash balance of
approximately Rs.1,28,215/- to meet his loan EMIS, Insurance renewals, Credit
card navment etc., as on 24-03-2020. It is not true to state that the 1st
respondent/]MFL to escape from his liability for his negligence and deficiency of
service and the respondent wrongfully adjusted the same against wrong debit
and freezed the appellant's trading account with wrong debit of Rs.11,20,680/-
and charging interest for delayed payment for Rs.60,000/ till date of filing the
arbitration case. It is not true to state that the entire action is just to escape from
his wrong doing and to gain unlawfully.

Further it is to be noted that, the

Respondent/JMFL. on 13-07-n

12.45 pm by SMS alert, telephoned from JMFL Nellore official and emails at 4.30
pm and also NSE Exchange contract note at 9.30 pm. It is not true to state that
Why not Communicated for the same for sale dt 16.03.2020 and auction dt.
18.03.2020 and account freezing etc.

IV. RESPONSE TO THE GROUNDS OF APPEAL

(i) Reply to ground 1: The respondents 1 and 2 deny the baseless ground
of the Petitioner that it was Respondents primary obligation towards
Petitioner to inform about the notification dated 13.03.2020 on
13.03.2020. The Respondents states and submits that it was neither
primary obligation of the Respondents nor it was duty to inform the
Petitioner about notification, which is already available in the public
domain. In fact, it was primary responsibility of the Petitioner to exercise
caution while dealing in such shares which are highly risky.

(ii) Reply to ground 2: The respondents 1 and 2 denies each and every
statements made in ground 2 in toto. The Petitioner after selling his
18,000 Yes Bank shares on 16.03.2020, visited the respondents 1 and 2
Nellore branch in order to know whether the shares sold by him can be
adjusted against the shares bought on 13.03.2020. The Petitioner visited
 the Respondent Nellore branch at 10.47 am and he was there most of the
time in office. During the said meeting with the official of the
respondents 1 and 2, the official after consulting with the respective
department immediately informed to the petitioner that his request to
adjust the sold Yes Bank shares against the shares bought on
13.03.2020 cannot be acceded considering the notification of MoF and
communiques received from CDSL. In this scenario, the petitioner was
requested to square-off his open Yes Bank position, which the petitioner
did not do so at his own will. The petitioner again on the same day,
visited the respondents 1 and 2 Nellore branch at 03.52 pm requesting to
adjust the Yes Bank shares. It is to be noted that the Petitioner had
in his arbitration reference before the Ld. Sole Arbitrator during the
hearing on the first time orally admitted about his visit to branch.

(iii) Reply to ground 3: It is denied by the respondents 1 and 2 that despite

restrictions imposed vide notification dated 13.03.2020, the respondents
1 and 2 permitted the selling of yes bank shares. In this regard, the
Respondents states and submits that SEBI vide its email dated
16.03.2020 to Depositories, directed to take following action with regards
to para 3(8) of the said notification of MoF:

“In respect of all cash transactions entered into by the existing

shareholders before the commencement of the scheme, settlement

will happen without the application of the lock-in period, subject to

the condition that the shares so acquired shall be deemed to be

part of the shareholding of the buyer and the lock-in period will apply

to the shareholding of the buyer. Accordingly, if X has sold 1000

shares to Y before commencement of the Scheme, X shall deliver

1000 shares to Y on settlement date. The lock-in as per para 3(8)

will then apply to Y.”

Which means, the investors/traders will not be able to sell shares bought
on 12.03.2020 and 13.03.2020 until they get delivery of the shares in
their demat account. However, the 75 per cent restriction will be
applicable only on shares held by investors up to 13.03.2020 and not on
new shares that are bought from Monday i.e. 16.03.2020. So, from
16.03.2020, whatever new shares are bought, will be available to sell
freely. Admittedly, the Appellant on 16.03.2020 sold 18,000 quantities of
Yes Bank shares at 09.00.27 a.m., which was executed at 09.07.59 am.
(iv) Reply to ground 4: The Respondents 1 and 2 denies that there was no
change in ISIN code of Yes Bank shares. The respondents 1 and 2 states
and submits that the Petitioner after the sale 18,000 shares of Yes Bank
on 16.03.2020, the shares purchased on 13.03.2020 were credited in the
appellant’s demat account on 18.03.2020 under old ISIN: INE528G01027
and the shares sold on 16.03.2020 were settled under new ISIN:
INE528G01035 by the Exchange/Clearing Corporation on 18.03.2020.
Hence, when the Appellant sold 18,000 quantities of Yes Bank shares on
16.03.2020, no shares were lying in his demat account under new ISIN:
INE528G01035. This action of the Appellant led to auction of 18,000
shares of Yes Bank. It is a fact that the respondents 1 and 2 had received
the pay-out of 18,000 shares of Yes Bank for purchase dated 13.03.2020
late from the Clearing Corporation on 18.03.2020 under old ISIN:
INE528G01027 and Yes Bank shares were converted in to new ISIN
INE528G01035 on 19.03.2020, this is clearly being revealed from the
demat transaction statement enclosed.

(v) Reply to ground 5: The respondents 1 and 2 denies each and every
statement in ground 5 in toto. The respondent states and submits that
Due to unprecedented situation occurred due to novel corona virus and
the nationwide lockdown imposed, the courier services were at halt
completely. Therefore, the Auction Bill was not sent in physical to the
Appellant. The respondents 1 and 2 requests the Hon’ble to appreciate
the fact and circumstances prevailed due to nationwide lockdown.
Further, the auction was carried out as per the policies and procedure
agreed by the Appellant at the time of account opening and also
communicated to the Appellant the latest and amended Policies and
Procedure on 14.01.2020 through email. The said Policies and
Procedures are also available on the website of the respondents 1 and 2
and also on the online trading platform. The relevant portion is
reproduced below for ready reference.

J. Shortages in obligations arising out of internal netting of trades

JMFS has the following policy for settling transaction, which remains
unsettled due to Internal Shortages: Internal Shortages means one client
has failed to give the delivery of the securities/commodities sold, which
has resulted into short delivery to other client(s) of JMFS. The
transactions, which remain unsettled due to the Internal Shortage
of securities/commodities shall be closed out on the day on which
auction takes place, as per formula given below:
 For Equity segment: For
securities, which are part of
(vi) NIFTY or Sensex indices or
Reply
traded in NSE Derivatives
segment
The higher of the following:
 3% above the closing rate
to of the security on the
auction day;
 3% above the average
buying price of the buyer
client on transaction day (T
Day).

For all other securities The higher of the following:

 5% above the closing rate of
the security on the auction
day;
 5% above the average
buying price of the buyer
client on transaction day (T
Day).
not done in NSE and it was internally generated slip dated 18.03.2020
purchased Yes Bank 18000 shares at 62.26/- which was communicated
to the Petitioner on 27.04.2020. The Respondents 1 and 2 states that the
18,000 shares bought by the Petitioner on 13.03.2020 were received late
from clearing corporation on 18.03.2020 instead of 17.03.2020 in the
light of Yes Bank Reconstruction Scheme announced by the MoF.
Further the shares bought by the Petitioner were sub-divided into 13500
shares as ‘Lock-in shares’ and the remaining balance i.e. 4500 shares
were as ‘free shares’, which is clearly been revealed from the demat
statement. The 18,000 Yes Bank shares sold by the Petitioner went for
internal auction because the Petitioner failed to fulfill his obligations to
deliver the shares and on the other hand the shares sold by the
Petitioner were settled in new ISIN and hence there were no shares at all
in the Petitioner’s demat account to adjust the same on the date of pay-
in i.e. 18.03.2020. It is to be noted the Petitioner is still holding 13,500
shares of Yes Bank in his demat account, which he can sell after the
lock-in period/or as and when the lock-in is over.

(vii) Reply to ground 7: The Respondents 1 and 2 denies the contents

stated in ground 7 in toto. The Petitioner’s contention with respect to
debiting his account on 24.03.2020 with back dated entry on 19.03.2020
is the baseless argument which has no proper basis and strictly denied.
The Respondent states that there was delay in pay-in/pay-out of shares
at Exchange and Clearing Corporation level, which resulted in delay in
reconciliation and identifying the shortages in Yes Bank shares and to
further take action of debiting the Petitioner’s demat account. Since,
there was a delay in receiving information from the Exchange and
Clearing Corporation, the Respondents cannot proceed with
reconciliation of shares and pass the debit/credit entries in the
 Petitioner’s demat account. However, the fact is the Petitioner being a
regular investor/trader must have checked his demat account ledger
every day before trading then how the Petitioner has not raised the
objection when the bill entry was not passed in his broking account for
the trade dated 16.03.2020. Why the Petitioner remained silent being a
regular investor/trader and when he did not saw the ledger entry for
trade dated 16.03.2020 on the next day? This proves that the Petitioner
had an intention to blame the Respondent on later date if something goes
against him and therefore the Petitioner was rigid on not squaring-off his
Yes Bank position on 16.03.2020 in spite of being aware about the
consequences explained by the branch official of the Respondent. As far
as concerned about allowing the Petitioner to take payout of Rs.40,000/-
on 20.03.2020 was because the aforesaid situation arose at the
Exchange and Clearing Corporation level. The Petitioner was allowed to
take payout of Rs.40,000/- because the Petitioner had credit balance in
his account when the debit entry was not passed in his broking account.
Further the Petitioner was allowed to trade on 24.03.2020 as per the risk
policy of the Respondent and as per the buy and sell transaction carried
out by the Petitioner. However, the basic point of the issue is, in spite of
being aware about the consequences the Petitioner choose not to square-
off his Yes Bank open position on 16.03.2020. The Petitioner was allowed
to trade on 24.03.2020 because the Petitioner had sold his 1,50,000
shares of Vodafone-Idea shares. However, the basic point of the issue is,
in spite of being aware about the consequences the Petitioner choose not
to square-off his Yes Bank open position on 16.03.2020.

(viii) Reply to ground 8: The Respondents 1 and 2 denies each and every
statement made in ground 8 in toto being irrelevant to the present
dispute. Hence, this ground should not be accepted.

(ix) Reply to ground 9: The Respondents 1 and 2 denied each and every
statement made in ground 9 in toto being superficial and imaginary. The
Respondents repeat, reiterate and reaffirm what is submitted in this
counter. Hence, this ground should not be accepted.

Obligation of the 1st and 2nd Respondents towards its clients:

 (x) Reply to ground 10: The Respondents 1 and 2 denies each and every
statement made in ground 10 in toto being irrelevant to the present
dispute. Hence, this ground should not be accepted.

(xi) Reply to ground 11: The Respondents 1 and 2 denies each and every
statement made in ground 11 in toto being irrelevant to the present
dispute. Hence, this ground should not be accepted.

(xii) Reply to ground 12: The Respondents 1 and 2 denies each and every
statement made in ground 12 in toto being irrelevant to the present
dispute. Hence, this ground should not be accepted.

(xiii) Reply to ground 13: The Respondents 1 and 2 denies each and every
statement made in ground 13 in toto being irrelevant to the present
dispute. Hence, this ground should not be accepted.

(xiv) Reply to ground 14: The Respondents 1 and 2 denies each and every
statement made in ground 14 in toto being irrelevant and superficially.
The Respondents 1 and 2s 1 and 2 repeat, reiterate and reaffirm what is
submitted in this counter. Hence, this ground should not be accepted.

(xv) Reply to ground 15: The Respondents 1 and 2 each and every statement
made in ground 15 in toto being irrelevant to the present dispute. Hence,
this ground should not be accepted.
(xvi)
V. RESPONSE TO SECTION V
The Petitioner does not have any right to add, amend, substitute or
modify any of the ground without the permission of the court.

VI. RESPONSE TO SECTION VI LIMITATION

The Respondents 1 and 2 denies each and every statement made
in section VI.

VII. RESPONSE TO SECTION VIIJURISDICTION

The Respondents 1 and 2 states and submits that as per NSE

Regulation, Refer Regulation 5.3 at Page No. 33 the Petition filed in
Nellore court is to be rejected. Following is Regulation 5.3.

5.3 JURISDICTION OF COURTS

 For the purpose of Byelaw 17 of Chapter XI of the Byelaws of the
Exchange, the application under section 34 of the Act, if any,
against the decision of the Appellate Arbitrator shall be filed in the
competent court nearest to such regional centre where the
Appellate Arbitral proceedings have been conducted.

Thus, in view of the above regulation, since the appeal proceedings

were held in Hyderabad, the petition has to be filed in courts at
Hyderabad only.

• The petition filed in Nellore is also not maintainable in view

of the non-compliance of the statutory mandate under Section 34
(5) of the Arbitration and Conciliation Act.

(5) An application under this section shall be filed by a party only

after issuing a prior notice to the other party and such application
shall be accompanied by an affidavit by the applicant endorsing
compliance with the said requirement

VIII. RESPONSE TO SECTION VIII (DECLARATION), IX (VALUATION &

COURT FEE) AND X (PRAYER)

The respondents 1 and 2 denies each and everything stated in section

VIII, IX and X.

BRIEF FACTS OF THE CASE:

The Respondents begs to submit as follows:

(a) The Petitioner had opened Brokerage Account No. 13810036 in the
month of June 2016 with 2 nd respondent at Nellore Branch. ANNEXURE
“A” filed by the Respondents 1 and 2 before the Arbitral Tribunal is a
copy of the KYC documents along with other documents executed by
the Petitioner. Further, it is to be noted that the Petitioner is highly
educated individual, having his own audit firm named as 'Ramesh and
Co.,' which affirms that the petitioner understands the technicality of
stock market and its operation.

(b) The Petitioner during his trading tenure was actively trading in cash and
derivative segment without any dispute. The Petitioner is familiar with
the trading, having good experience as an investor/trader. The
Petitioner during his trading tenure has transferred huge amount to his
 broking account on various instances and has also accepted the payout
several times from the respondents 1 and 2, as per his requirement.
ANNEXURE “B” filed by the respondents 1 and 2 before Arbitral
Tribunal is a Ledger Statement. It is evident from the Ledger Statement
that the petitioner knows when to infuse funds to his broking account
and when to take payout as per his trading pattern. This also affirms
that the petitioner was tracking his account on regular basis.

(c) The Petitioner is a regular trader/investor since the date of broking

account opening. As per the petitioner, he had 15 years of experience
and knowledge of the stock market functioning and its operations. The
petitioner had carried out the trading at his own through the online
trading platform provided by the respondents1 and 2.

(d) On 13.03.2020, the petitioner purchased 18,000 quantities of “Yes

Bank” shares right before the few minutes of market closing. This
proves that the petitioner had intention to take the shares for delivery.
The scheduled settlement date / share payout of the said shares was
17.03.2020. ANNEXURE “C” filed by the respondents 1 and 2 before
Arbitral Tribunal is the Contract Note dated 13.03.2020 which has all
the trades’ details.

(e) On 13.03.2020 (Friday), the “Ministry of Finance” (Department of

Financial Services) had issued the notification with respect to ‘Yes Bank
Limited Reconstruction Scheme, 2020’, which came into force with
effect from 13.03.2020.

(f) After the said notification issued by the Ministry of Finance (MoF), on
15.03.2020 (Sunday) the Depository issued a Communique intimating
Depository Participants regarding the said notification of Ministry of
Finance and its effect. As per the said notification, the ‘Yes Bank Limited
Reconstruction Scheme, 2020’ shall come into force with effect from
13.03.2020. Further, as per the said notification, 75 percent of all Yes
Bank shares that held in the demat accounts of the investors will be
locked for 3 years and cannot be sold. However, the restriction on
 shares sell will not be applicable on investors holding less than 100
shares of the Yes Bank.

(g) Further, SEBI vide its email dated 16.03.2020 to Depositories, directed
to take following action with regards to para 3(8) of the said notification
of MoF:

“In respect of all cash transactions entered into by the existing

shareholders before the commencement of the scheme, settlement
will happen without the application of the lock-in period, subject to
the condition that the shares so acquired shall be deemed to be part
of the shareholding of the buyer and the lock-in period will apply to
the shareholding of the buyer. Accordingly, if X has sold 1000 shares
to Y before commencement of the Scheme, X shall deliver 1000
shares to Y on settlement date. The lock-in as per para 3(8) will then
apply to Y.”

Which means, the investors/traders will not be able to sell shares

bought on 12.03.2020 and 13.03.2020 until they get delivery of the
shares in their demat account. However, the 75 per cent restriction will
be applicable only on shares held by investors up to 13.03.2020 and not
on new shares that are bought from Monday i.e. 16.03.2020. So, from
16.03.2020, whatever new shares are bought, will be available to sell
freely. ANNEXURE “D” filed by the petitioner before Arbitral Tribunal is
a communique received from CDSL.

(h) Admittedly, the Petitioner on 16.03.2020 sold 18,000 quantities of “Yes

Bank shares” at 09.00.27 a.m., which was executed at 09.07.59 am
[ANNEXURE “E” filed by the respondents 1 and 2 before Arbitral
Tribunal is a Contract Note dated 16.03.2020]. The Petitioner has duly
admitted the receipt of Contract Note and also trade confirmation from
NSE.

(i) After selling of the Yes Bank shares on 16.03.2020, the petitioner had
visited the respondents No.2 at Nellore Branch to meet the branch
official and to discuss on Yes Bank shares issue. During the meeting
the respondent No 2 the branch official, had informed and explained
to the petitioner about the lock-in of 75% shares of Yes Bank as per
 the notification of the (MoF) dated 13.03.2020 and the risk of auction
involved in keeping the sell position open. The respondent No.2
branch official had informed the petitioner to square-off Yes Bank
open position immediately but the petitioner choose not to do
anything but to keep the position open in spite of being aware of the
consequences. The petitioner was in the branch from around 10.47
A.M and he was there in the office during the entire day for discussion
spending most of the time on 16.03.2020. It is to be noted that the
petitioner nowhere in his statement of case or in the various
submissions made before the Investor Service Cell of the Exchange
disclosed the said fact, which only proves that the petitioner is hiding
facts before the Learned Tribunal. The respondents 1 and 2 state that
it was for the first time during Arbitration hearing on 16.12.2020, the
petitioner had admitted about his visit to the respondents No .2
branch at Nellore on 16.03.2020. ANNEXURE “F” filed by the
respondents No.1 and 2 before Arbitral Tribunal is the pictures of CCTV
footage of the petitioner’s visit to the respondent No.2 Nellore branch
and his presence on 16.03.2020.

(j) After the sale of 18,000 shares of Yes Bank on 16.03.2020, the shares
purchased on 13.03.2020 were credited in the petitioner’s demat
account on 18.03.2020 under old ISIN: INE528G01027 and the shares
sold on 16.03.2020 were settled under new ISIN: INE528G01035 by the
Exchange/Clearing Corporation on 18.03.2020. Hence, when the
petitioner sold 18,000 quantities of Yes Bank shares on 16.03.2020, no
shares were lying in his demat account under new ISIN: INE528G01035.
This action of the petitioner led to auction of 18,000 shares of Yes Bank.
It is a fact that the respondents 1 and 2 had received the pay-out of
18,000 shares of Yes Bank for purchase dated 13.03.2020 late from the
Clearing Corporation on 18.03.2020 under old ISIN: INE528G01027 and
Yes Bank shares were converted in to new ISIN INE528G01035 on
19.03.2020, this is clearly being revealed from the demat transaction
statement enclosed in paragraph.???
(k) Since the petitioner failed to fulfill his obligation to deliver shares on or
before the day of pay-in i.e. 18.03.2020, the auction entry was passed
on 19.03.2020, debiting the petitioner demat account for Rs.11,20,680/-
and the overall debit as on 19.03.2020 stood at Rs.10,79,943.58/-.
ANNEXURE “G” filed by the respondents 1 and 2 before Arbitral
Tribunal is an Auction bill. Due to unprecedented situation occurred due
to novel corona virus and the nationwide lockdown imposed, the
courier services were at halt completely. Therefore, the Auction Bill was
not sent in physical to the Petitioner. The respondents 1 and 2 request
the Hon’ble Court to appreciate the fact and circumstances prevailed
due to nationwide lockdown. Further, the auction was carried out as
per the policies and procedure agreed by the petitioner at the time of
account opening and also communicated to the Petitioner the latest
and amended Policies and Procedure on 14.01.2020 through email.
ANNEXURE “H” filed by the respondents 1 and 2 before Arbitral
Tribunal is a Policies and Procedures of the petitioner sent to the
Petitioner on 14.01.2020 along with logs indicating the same was
successfully sent. The said Policies and Procedures are also available on
the website of the respondents 1 and 2 and also on the online trading
platform. The relevant portion is reproduced below for ready reference:

J. Shortages in obligations arising out of internal netting of trades

JMFS has the following policy for settling transaction, which remains
unsettled due to Internal Shortages: Internal Shortages means one
client has failed to give the delivery of the securities/commodities sold,
which has resulted into short delivery to other client(s) of JMFS. The
transactions, which remain unsettled due to the Internal Shortage of
securities/commodities shall be closed out on the day on which
auction takes place, as per formula given below:
 For Equity segment: The higher of the following:
For securities, which  3% above the closing rate of
are part of NIFTY or the security on the auction
Sensex indices or day;
(l) traded in NSE  3% above the average
Derivatives segment buying price of the buyer
The client on transaction day (T
Day).

For all other securities The higher of the following:

 5% above the closing rate of
the security on the auction
day;
 5% above the average
buying price of the buyer
client on transaction day (T
Day).
petitioner for the very first time had raised the complaint to the
Petitioner on 25.03.2020, 26.03.2020 and 27.03.2020 alleging about
debit in his account. The respondents 1 and 2 on the receipt of emails
from the petitioner had acted upon and responded on 27.03.2020 to
the petitioner with necessary clarification. ANNEXURE “I” filed by the
respondents 1 and 2 before Arbitral Tribunal is a response email dated
27.03.2020.

(m) The petitioner in response to email dated 27.03.2020 had responded to

the respondents 1 and 2 on 28.03.2020 reiterating his contents and sent
one more email on 01.04.2020 requesting the respondents 1 and 2 to
revert on email dated 28.03.2020 at earliest. The Respondents on
01.04.2020 responded to the Petitioner with detailed clarification in the
matter along with CDSL communique received by the Respondents on
15.03.2020 (Sunday). ANNEXURE “J” filed by the Respondent before
Arbitral Tribunal is a response email dated 01.04.2020.

(n) The respondents 1 and 3 on 01.04.2020 received an email from NSE

intimating that the Petitioner has filed a complaint against the
Respondents to which the Respondents was required to file the reply.
The respondents 1 and 2 filed its detailed reply on 17.04.2020 by
denying the Petitioner’s allegations. ANNEXURE “K” filed by the
 respondents 1 and 2 before Arbitral Tribunal is a response email dated
17.04.2020.

(o) The respondents 1 and 2 on 24.04.2020 received an email from NSE

that the Petitioner has sought clarification regarding auction and debit
of funds in his broking account. The respondents 1 and 2 responded to
NSE email on 30.04.2020. ANNEXURE “L” filed by the Respondents
before Arbitral Tribunal is a response email dated 30.04.2020.

(p) The respondents 1 and 2 on 12.05.2020 received an email from NSE

containing Petitioner’s response to the respondents 1 and 2 reply
dated 30.05.2020 reiterating allegations. On 19.05.2020, the Petitioner
has again sent an email to NSE, which was received by the respondents
1 and 2 on the same day. On the receipt of the Petitioner submission
dated 12.05.2020 and 19.05.2020, the respondents 1 and 2 has filed its
reply dated 27.05.2020 denying all the allegations and once again
clarified the actual issue. ANNEXURE “M” filed by the Respondent
before Arbitral Tribunal is a response dated 27.05.2020.

(q) Further, as per NSE’s request attempt was made to call the Petitioner to
provide detailed clarification in the matter. The Petitioner did not
answer the call. Upon further request of NSE, the respondent 1 and 2
called the Petitioner and explained about the regulatory guidelines
which were not agreed by the Petitioner.

(r) After collating all the details and submission from the Petitioner and the
respondents 1 and 2 , on 07.07.2020 NSE arranged the IGRP meeting
through video conferencing in order to conclude the matter. After
verifying the facts and various submissions made by the Petitioner and
respondents 1 and 2, the Learned Panel Member of an IGRP heard both
the parties. The Learned Panel Member of IGRP came to conclusion that
the complaint filed by the Petitioner has no merits considering MoF
notification on Yes Bank Limited and for the reasons stated in the order.
The Learned Panel Member appreciated the fact of auction carried out
by the Respondents and the Petitioner’s claim was rejected. ANNEXURE
 “N” filed by the respondents 1 and 2 before Arbitral Tribunal is a GRC
Order dated 07.07.2020.

(s) Since, the petitioner did not clear his outstanding debit balance till
10.07.2020 (Friday), the respondents1 and 2 has sent recovery Notice to
the petitioner through email dated 10.07.2020 by informing him to
clear outstanding debit balance of Rs.10,45,095.68/- on or before the
commencement of trading on exchange on the day following the date
of the email failing which the respondents 1 and 2 shall be constrained
to liquidate his shares/securities. ANNEXURE “O” filed by the
respondents 1 and 2 before Arbitral Tribunal is a recovery notice dated
10.07.2020 sent to the Petitioner on his email. It is to note that, the
petitioner till date has not responded to the respondents, which proves
that the petitioner accepts the same.

(t) The petitioner failed to clear the outstanding debit balance of

Rs.10,45,095.68/-, the respondents 1 and 2 left with no option but to
liquidate his shares/securities on 13.07.2020 and the same was
informed to the Petitioner through email dated 13.07.2020. ANNEXURE
“P” filed by the respondents 1 and 2 before Arbitral Tribunal is the
email dated 13.07.2020 sent to the Petitioner informing about
liquidation. It is to be noted that, the Petitioner till date has not
responded to the Respondents, which proves that the Respondent
accepts the same.

(u) As there was an outstanding debit balance of Rs.7,19,715.07/- payable

by the petitioner, the respondents 1 and 2 again sent the recovery
notice to the Petitioner through email dated 20.07.2020 by informing
him to clear the outstanding debit balance of Rs.7,19,715.07/- without
causing further delay. ANNEXURE “Q” filed by the respondents 1 and 2
before Arbitral Tribunal is the email dated 20.07.2020 and contract note
dated 13.07.2020. It is to be noted that, the Petitioner till date has not
responded to the respondents 1 and 2, which proves that the
Respondent accepts the same.
(v) Aggrieved by the GRC order date 07.07.2020, the petitioner challenged
the said GRC order and filed the Arbitration against the respondents
1and 2. ANNEXURE “R” filed by the Respondents before the sole
Arbitrator is the Arbitration petition filed by the Petitioner.

(w) On the receipt of the Arbitration petition from the Exchange, the
respondents 1 and 2 filed the statement of defense by demonstrating
actual facts supporting sufficient evidences, which proves the actual
events. ANNEXURE “S” filed by the respondents 1 and 2 before Arbitral
Tribunal is the Statement of Defense filed by the respondents 1 and 2
before the sole Arbitrator.

(x) On 07.12.2020, the Exchange had conducted the first video conference
hearing. On the date of hearing, the Petitioner and the respondents 1
and 2 sought time for hearing, which was accordingly adjourned to
16.12.2020.

(y) On 16.12.2020, the Arbitral Tribunal gave the opportunity to the

Petitioner and the respondents1 and 2 to represent their case and
concluded the hearing and the matter was reserved for Award. Also, the
Arbitral Tribunal allowed the Petitioner and the Respondents 1 and 2 to
file their written submission on or before 23.12.2020.

(z) On 23.12.2020, the Petitioner filed his Written Arguments, which is

same as the present Appeal filed by the Petitioner. The Respondents 1
and 2 on 23.12.2020 filed its Written Statement by reiterating all the
actual facts. ANNEXURE “T” filed by the respondents 1 and 2 before
Arbitral Tribunal is copy of the written arguments filed by the Petitioner
before the sole Arbitrator.

(aa) On 30.12.2020, the Sole Arbitrator passed the detailed Arbitration

Award in the favor of the respondents 1 and 2 and the said Award deals
with all the submissions including oral submission. The Sole Arbitrator
passed the Arbitral Award in favor of the respondents 1 and 2 after
verifying and analyzing the submission and has brought the actual facts
 in the Award. ANNEXURE “U” filed by the respondents 1 and 2 before
Arbitral Tribunal is the Arbitration Award dated 30.12.2020.

(bb) Aggrieved by the Arbitration Award dated 30.12.2020 passed by the

Sole Arbitrator, the Petitioner preferred an arbitration appeal before
the panel of arbitrator appointed by the National Stock Exchange of
India Limited (NSE). The Petitioner placed on record its detailed
pleadings, ground and documentary evidence for dismissing the appeal
proceedings.

(cc) On 20.04.2021, the Arbitral Tribunal passed the Impugned Award

contrary to the pleadings, facts and documentary evidence on record.
Hereto filed and marked as Annexure "V" is the Impugned Award dated
20.04.2021.

(dd) The Arbitral Tribunal has passed an unreasoned Impugned Award dated
20.04.2021 in a very hasty manner and inadvertently made the
manifold slipup, which eventually the respondents 1 and 2 has suffered.
The Arbitral Tribunal has failed to deal with all the facts on record
resulting in making of Impugned Award. The Appeal Award required
correction, interpretation and passing of additional Award on account
of erring the important information, figures and facts.

(ee) On 03.06.2021, the respondents 1 and 2 filed an application u/s 33 of

the Arbitration and Conciliation Act, 1996 for the purpose of seeking
interpretation, correction and passing of an additional award on an
Appeal Award passed on 20.04.2021, which was received by the
Respondents 1 and 2 vide email dated 17.05.2021 and through courier
on 07.06.2021.

(ff) The Respondents in its application u/s. 33 of Arbitration Act has

categorically stated that, the Arbitral Tribunal has overlooked the
documentary evidence submitted by the respondents 1 and 2 and suo
moto considered and favored the Petitioner by awarding against the
respondents 1 and 2 to reverse sell proceed of 14,500 shares of Yes
Bank, which was not even prayed by the Petitioner in his Appeal
 Statement or during the hearing before Arbitral Tribunal. The
respondents 1 and 2 placed on record the above facts for the Appellate
Arbitral Tribunal consideration and for passing the additional Award by
correcting the erred facts and the award. However, no discussion or
order has been made by the Arbitral Tribunal on the same in the
corrected / modified award passed subsequently.

(gg) It was also observed by the Respondents in entirety of the Appeal

Award that, the Arbitral Tribunal has passed unreasoned award without
considering the documentary evidence submitted by the Respondents
like affidavit, CCTV footage of the Petitioner visiting Respondents office
on 16.03.2020 and no response on recovery notice sent to the
Petitioner. The Respondents prayed the Appellate Arbitral Tribunal to
consider this fact and pass the additional Award by correcting the erred
and missed facts and by passing speaking award in terms of the above
fact and records.

(hh) The respondents 1 and 2 prayed the Arbitral Tribunal to reconsider its
submission made by way of written and also oral submissions made by
the Respondents during the arbitral proceedings and pass the
revised/additional Award considering above necessary facts.
Nonetheless, in spite of above pleading and prayers, the Arbitral
Tribunal failed to take the same into consideration and pass appropriate
additional award by referring to the same. The Impugned award is
totally silent on the above crucial aspects.

(ii) The Arbitral Tribunal by completely overlooking and discarding the

above facts passed the corrected/modified Arbitration Award on
02.07.2021, which was received by the respondents 1 and 2 vide email
dated 13.08.2021 and through courier on or about 26/27.08.2021.
Hereto filed and marked as Annexure "W" is the Corrected/Modified
Impugned Award dated 02.07.2021.
 The petition filed by the appellant is devoid of merits and the petitioner did
not file any proof to prove his allegations and that the respondents pray this
Hon’ble court to dismiss the petition in the interest of justice.

1.

2.

Filed by me.

All the respondents herein do hereby

declare that the above stated facts are true to the

best of our knowledge, information and belief.

1.

2.

Filed by me.

Advocate for Respondents.

Enclosures which we have attached to the counter to prove

the case :-

1.

2.

3.
4.

5.

6.

7.

IN THE COURT OF THE IV ADDL

DISTRICT JUDGE : NELLORE

A.R.O.P. No.618/2021.

COUNTER FILED ON BEHALF

OF THE RESPONDENTS
ADDRESS FOR SERVICES:-

O.ABBAI REDDY,

M.BRAMHAM,

M.MAHENDRA,

G.SUMAN,

ADVOCATES NELLORE.